WTO orders U.S. to halt Boeing subsidies

GENEVA — The World Trade Organization ordered Monday the United States to halt unfair subsidies and tax breaks to planemaker Boeing, judging them to have damaged European rival Airbus.

The WTO’s Appellate Body said that it found that certain subsidies and tax breaks “caused, through their effects on Boeing’s prices, serious prejudice in the form of significant lost sales” to Airbus in the market for civil aircraft with 100-200 seats, according to a summary of the 700-page ruling.

That segment is for the medium-haul Airbus A320 and Boeing 737, which are their top selling aircrafts.

It also found that research and development subsidies also skewed competition for larger aircraft of 200-300 seats, and that such subsidies for the 787 Dreamliner “caused serious prejudice to the interest of the European Communities.”

The US has six months to comply with the ruling.

Even before the publication of the WTO ruling, both the European Union and United States claimed victory in the dispute.

The EU had launched the complaint, claiming the United States gave Boeing billions of dollars in illegal subsidies after Washington had disputed EU aid to European aircraft manufacturer Airbus.

In a ruling on March 31, 2011, the WTO partly upheld the EU complaint, but it was appealed.

The European Commission on Monday welcomed the WTO final ruling, saying it confirmed that billions of dollars in US subsidies to Boeing were illegal under WTO rules.

“Today’s ruling vindicates the EU’s long-held claims that Boeing has received massive US government hand-outs in the past and continues to do so today”, said EU Trade Commissioner Karel De Gucht.

The United States took the opposite stand, saying the WTO decision confirmed that Europe’s unfair trade subsidies to aircraft maker Airbus have dwarfed US aid to Boeing.

“This decision is a tremendous victory for American manufacturers and workers — and demonstrates the Obama administration’s commitment to ensuring a level playing field for Americans,” Ron Kirk, the US Trade Representative, said in a statement before the WTO appeals panel published its findings.

“It is now clear that European subsidies to Airbus are far larger — by multiples — and far more distortive than anything that the United States does for Boeing,” he said.

The US highlighted that the WTO had found last May in a separate case that the European Union gave Airbus $18 billion (13.7 billion euros) in subsidised funding that resulted in lost market share and sales for Boeing.

“In today’s findings, the comparable figures (for Boeing) were between $3 and $4 billion in US subsidies, and lost sales (for Airbus) of just slightly more than 100 aircraft,” the statement said.

The European Commission said the WTO appeal ruling found that Boeing received between $5 and $6 billion of illegal subsidies between 1989 and 2006, and was estimated to have received another $3.1 billion since.

Airbus said the WTO ruling found the effects of the illegal funding were much larger.

“The Report confirms the existence of illegal U.S. subsidies to Boeing – previously identified by the WTO as ‘at least $5.3 billion’ and extended by billions of US dollars as a result of today’s decision — resulting in an estimated loss of approximately $45 billion in sales for Airbus,” the company said in a statement.

“The Appellate Body has now spoken in both the Airbus and Boeing cases,” said Rainer Ohler, Airbus’ Head of Public Affairs and Communications.

“Comparing the core claims made by both sides, the net outcome is clear: Boeing’s cash grants are fundamentally illegal, while the system of loans to Airbus by European governments is legal and may continue.”

It quipped the Boeing 787 should renamed the “7aid7″.

Top level talks might be the only way to end the seven year state-aid dispute between aerospace groups Boeing and Airbus, an EU diplomat said last month after the WTO sent its ruling to companies.

The WTO appeals panel also recognised that the ruling may not end the dispute.

“We realise that, after more than five years of panel proceedings and eleven months of appellate review, a number of issues remain unresolved in this dispute,” said the finding.